UPDATE 1-Baby formula supplies improving, say U.S. retailers Walmart and Target

(Adds Target statement)

Aug 16 (Reuters) - Two big U.S. retailers Walmart Inc and Target Corp said on Tuesday that supplies of baby formula were improving, months after the country faced acute shortages that had caused a panic among parents.

Considering the still-existing supply constraints, Target said it will continue with the purchase restrictions both at its stores and online.

The shortage that began due to pandemic-induced supply chain issues worsened in February when Abbott Laboratories, the biggest U.S. supplier, recalled some products and closed a manufacturing plant after reports of bacterial infections.

In response, U.S. health regulators relaxed import policies and shipped in millions of cans of emergency supplies from companies such as Nestle SA and Reckitt Benckiser .

Abbott in early July partly restarted production of certain specialty and metabolic formulas at its Sturgis facility while also importing baby formula products from its international plants.

Walmart Chief Financial Officer John David Rainey said on an earnings call on Tuesday the shortage the company experienced in a "big way" in the second quarter was easing.

Data from market research firm IRI also showed stock levels for baby formula in U.S. stores have improved in the recent weeks.

In its quarterly report, Walmart said it now expects a smaller drop in its annual profit as discounts to clear excess merchandise and lower fuel prices helped it beat quarterly sales expectations. (Reporting by Ananya Mariam Rajesh and Uday Sampath in Bengaluru; Editing by Shinjini Ganguli and Arun Koyyur)